What is the IRS Whistleblower law?

Quite simply, the IRS Whistleblower law provides for payment to people who report – or “blow the whistle on” – people who fail to pay the tax they owe.

The Federal False Claims Act explicitly excludes tax fraud as do most state False Claims Acts. However, there is an IRS Whistleblower law, separate from the Federal False Claims Act, which provides for up to triple damages and whistleblower awards of 15 to 30 percent of the amount recovered. In simple terms, if the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

To file under this section of the law, the tax, penalties, interest, and additions in dispute must total a sum in excess of $2,000,000, and a few other provisions must be met. If the case involves an individual who is not paying taxes, his or her annual gross income must be more than $200,000. There is another IRS Whistleblower award program for cases that do not meet these criteria. The award is less, with a maximum of 15 percent up to $10 million, and the award is discretionary.

Additionally, the Whistleblower Protection Act of 1989 is a federal law that protects federal whistleblowers who work for the government and report agency misconduct. Employers are forbidden from retaliating against employees who file complaints. An employee may file a complaint about matters involving violation of a law, rule or regulation; gross mismanagement; gross waste of funds; abuse of authority; or substantial and specific danger to public health or safety.

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